Posts belonging to Category Central Banks

An optimistic set of monetary policy meeting minutes released by the Bank of England (BoE) yesterday at the conclusion of its latest gathering lit a fire under the pound.

After making gains in the region of 1% versus all of its major peers, Sterling continues to see strong demand today. GBP/EUR is currently up 0.3% at €1.1268, with GBP/USD having risen by a commensurate amount to US$1.3438. GBP/AUD is performing slightly better, with gains of 0.4% taking the pairing to A$1.6805, although GBP/NZD has only moved up 0.1% to NZ$1.8545. GBP/CAD has risen in line with other pound pairings to strike C$1.6349.

Provided economic data continues to clock in broadly in line with the new trend, the minutes stated, the bank is likely to raise interest rates faster than the market is currently expecting.

On the face of it, the latest BoE Monetary Policy Committee (MPC) meeting seemed fairly pedestrian. No changes were made to interest rates or quantitative easing, and only the two usual suspects – Ian McCafferty and Michael Saunders – pushed for the committee to raise borrowing costs.

However, the meeting minutes revealed that the bank saw the UK economy as outperforming the forecasts set out in its latest Inflation Report, which was released in August. Provided economic data continues to clock in broadly in line with the new trend, the minutes stated, the bank is likely to raise interest rates faster than the market is currently expecting.

With some analysts suggesting that this may mean that the BoE hikes interest rates as soon as November, demand for the pound swelled.

Although the euro was unable to resist the pound’s advances, it is finding support elsewhere thanks to comments from European Central Bank (ECB) policymaker Bostjan Jazbec, who calmed fears that the central bank would react to stronger euro exchange rates by intervening to weaken the currency.

US dollar also found strong support yesterday, thanks to above forecast inflation data. The consumer price index rose 1.9% in August – an above forecast result that saw markets beginning to hope once again that there may be a third interest rate hike from the Federal Reserve this year.

Wise Money Market News

There is nothing on the UK data calendar today, but the pound is likely to remain in strong form as the aftermath of yesterday’s Bank of England meeting continues to have a positive effect.

It’s a quiet day for Eurozone data, with only the trade balance figures for July and labour costs for the second quarter set for release soon.

According to forecasts, the latest US data is likely to take the shine off yesterday’s strong inflation figures. Advanced retail sales growth is expected to have slowed in August, while University of Michigan confidence index is predicted to fall. This further improves the likelihood that the pound will be able to hold on to its gains during today’s session and end the week on a high note.

Can the Conservatives still emerge from the election with a greater majority? Or will the UK end up with a Labour-led coalition? As it stands the result is getting too close to call, and all the uncertainty certainly isn’t doing the pound any favours.

GBP/EUR fluctuated between €1.1543 and €1.1442, GBP/USD dropped from a high of $1.2877 to $1.2795, GBP/AUD gradually eased to AU$1.7146, GBP/NZD hit a worst level of NZ$1.8026 and GBP/CAD bottomed out at C$1.7201, down from C$1.7359.

Although a report published by analysts at JP Morgan indicated that a hung parliament could actually be good for the pound, GBP exchange rates failed to derive much benefit.

Wise Money market roundup

Although a report published by analysts at JP Morgan indicated that a hung parliament could actually be good for the pound, GBP exchange rates failed to derive much benefit.

Up until now it has been argued that an outright win for the Conservatives, which would see the party increase its majority, would be the best outcome in terms of facilitating smoother Brexit negotiations. That assumption saw the pound drop when Conservative’s lead against Labour was dramatically slashed.

Now, however, JP Morgan has asserted; ‘In the post-referendum world, all political developments need to be viewed through a Brexit prism and an argument can be made that a hung parliament which delivered or held out the prospect of a softer-Brexit coalition of the left-of-centre parties … might actually be GBP positive.’

The pound still closed Tuesday weaker in spite of this assumption, and extended some of these losses on Wednesday.

The euro did come under a bit of pressure of its own however as German inflation fell short of forecasts and rumours that Greece intends to default on upcoming bond repayments emerged.

What’s coming up money wise?

This morning’s UK reports were on the mixed side. The GfK consumer confidence index actually improved unexpectedly, rising from -7 to -5 rather than falling to -8.

The result, while in the negative range, was actually still a four-month high.

According to GfK’s Joe Staton; ‘Perhaps the real squeeze in living standards is yet to hit home. We haven’t seen any significant fall (in consumer confidence) of the kind we might expect during such periods of pre-election and pre-Brexit uncertainty.’

However, while that result surprised to the upside the Lloyds Business Barometer was far less impressive, plummeting from 47 to 27. The British Retail Consortium’s (BRC) shop price index also eased -0.4% rather than the -0.3% projected.

This mishmash of figures left the pound little changed against most the majors, although GBP/EUR did edge slightly lower in spite of Germany’s retail sales data falling short. Consumer spending in the Eurozone’s largest economy fell -0.2% on the month in April (an increase of 0.4% was expected) with the annual figure printing at -0.9% rather than 2.2%.

Later today the UK’s mortgage approvals and lending data could spark a bit of movement, but attention is likely to remain fairly focused on political developments now that the general election is within touching distance.

The Eurozone’s unemployment numbers and inflation data could give the pound a bit of respite mid-morning as inflation is expected to ease in May. If inflation does fall to 1.5% on the year it would reduce the odds of the European Central Bank (ECB) making any attempt to adjust stimulus in the near future, reducing demand for the euro.

Meanwhile, Canadian growth data is likely to impact CAD exchange rates, while USD movement could follow the release of US pending home sales numbers.

After a more than sluggish start to the week, the pound finally managed to recoup some losses on Tuesday.

GBP/EUR advanced from €1.1529 to €1.1614, GBP/USD peaked at $1.3021 (up from lows of $1.2956), GBP/AUD marched from AU$1.7265 to AU$1.7431 and GBP/NZD improved from NZ$1.8418 to NZ$1.8563.

If Draghi holds with the view that the current level of stimulus is appropriate the euro could slide.

Wise Money market roundup

The pound’s Tuesday gains came in spite of fairly damning comments from German Finance Minister Wolfgang Schaeuble.

The German official warned that Britain ‘will learn Brexit was a mistake’ – indicating that the Eurozone’s largest economy has no intention of making the negotiations easy for the UK.

Other UK news was also less-than-inspiring, with data from the Office for National Statistics (ONS) showing that the UK borrowed significantly more than anticipated in April.

Elsewhere, the euro was supported by upbeat data for the Eurozone, including an impressive manufacturing report for the currency bloc.

The US dollar, meanwhile, fluctuated as the US services index impressed but the nation’s manufacturing equivalent fell short.

What’s coming up money wise?

The pound crept higher on Wednesday, recording modest gains against most the main currencies.

There’s nothing notable on the calendar in terms of UK data today, so any further pound movement is likely to be the result of either political developments or influence from elsewhere.

This morning’s German GfK consumer confidence result beat forecasts, edging up from 10.2 to 10.4, but its impact on the euro was minimal.

However, GBP/EUR volatility may follow today’s speech from European Central Bank (ECB) President Mario Draghi. Earlier in the week German Chancellor Angela Merkel blamed the ECB’s quantitative easing scheme for the relative weakness of the euro.

Any response Draghi makes to those remarks will be closely attended to. If Draghi holds with the view that the current level of stimulus is appropriate the euro could slide.

We also have the Bank of Canada (BOC) interest rate decision, with a cautious tone from the central bank liable to boost the GBP/CAD exchange rate.

Of course we may also see GBP/USD movement following the publication of the minutes from the Federal Reserve’s last policy meeting. Support for a rate increase in June would benefit the US dollar.

With the Conservative’s lead over labour falling in the latest polls, the pound edged lower as a new week of trading began.

GBP/EUR hit a low of €1.1587 (down from opening levels of €1.1611), GBP/USD eased from a high of $1.3010 to $1.2973, GBP/AUD lost 0.3% to trade in the region of AU$1.7412 and GBP/NZD plummeted over 0.7% to hit a low of NZ$1.8667.

How did the latest election news weaken the pound? Additional pound losses are likely if the Conservative lead narrows further over the next couple of weeks.

Wise Money market roundup

Monday’s pound losses were largely due to the news that the latest polls relating to the fast-approaching UK general election revealed a decline in the Conservative lead following the publication of the party manifestos.

According to Reuters; ‘May had been on course for a landslide with a majority of up to 150 seats, opinion polls had indicated in the early stages of campaigning ahead of the June 8 national vote.

Four polls on Saturday however showed the Conservatives with an expected vote share of between 44 and 46 percent, still easily ahead of the Labour Party on 33 to 35 percent, but pointing to a smaller projected majority of about 40 seats.’

As a greater Conservative majority is expected to improve the UK’s hand in Brexit negotiations, the news that the outcome might be tighter than previously projected left Sterling struggling.

The pound recorded losses against all the majors and fell back below $1.30 against the US dollar after previously benefiting from dovish interest rate related comments from a Federal Reserve official.

GBP/EUR was also floundering thanks to the news that Greek MPs had supported the introduction of more austerity in order to receive the nation’s next batch of financial aid.

Additional pound losses are likely if the Conservative lead narrows further over the next couple of weeks.

What’s coming up money wise?

There isn’t much on the calendar today with the potential to inspire currency movement.

However, tomorrow is looking more interesting in terms of influential releases.

GBP/EUR could experience volatility in response to Germany’s final Q1 GDP data and the publication of manufacturing, services and composite PMIs for the Eurozone and its largest economies.

If the PMI releases point to slowing output it would reduce the likelihood of the European Central Bank (ECB) changing its current stance on monetary policy, potentially weakening the euro.

The UK, meanwhile, will be publishing its public finance figures while the US has Markit manufacturing, services and composite PMIs scheduled for release.

Gradual pound gains seem to be the theme of the week, with Sterling spending Tuesday sneaking its way higher against the majors.

GBP/EUR advanced to a May high of €1.1921, GBP/USD tiptoed to an eight-month high of $1.2981, GBP/AUD surged from AU$1.7557 to AU$1.7649, GBP/NZD closed the day above NZ$1.8800 and GBP/CAD recovered from C$1.7673 to C$1.7816.

With ‘Super Thursday’ looming, what can we expect from the pound?

If the Monetary Policy Committee (MPC) is still split on whether interest rates should rise, the pound may hit new multi-month highs against the majors.

Wise Money market roundup

It’s been a pretty good week for the pound so far, with the currency quickly shaking off a slightly sluggish start and managing to achieve its best levels for months against several of its rivals.

Positive UK news came in the form of an impressive like-for-like sales report from the British Retail Consortium (BRC). Like-for-like sales had only been expected to increase 0.5% so the actual result of 5.6% was well received.

Meanwhile, the euro’s post-election rally stalled, the Australian dollar was weakened by a concerning slump in domestic retail sales, the Canadian dollar was pressured lower by sliding crude oil prices and the New Zealand dollar softened ahead of the Reserve Bank of New Zealand (RBNZ) interest rate decision.

What’s coming up money wise?

With another quiet day for UK data ahead, the pound may be on pause ahead of tomorrow’s ‘Super Thursday’ of Bank of England (BoE) announcements.

Given that the UK general election is just weeks away, the BoE is highly unlikely to make any changes to monetary policy, but the attitude of policymakers towards future adjustments will be key to how the pound ends the week.

If the Monetary Policy Committee (MPC) is still split on whether interest rates should rise, the pound may hit new multi-month highs against the majors.

However, if the MPC is united in its belief that policy should remain accommodative despite spiking inflation we could see Sterling give up this week’s gains.

The BoE will also be publishing its inflation report. Upwardly revised inflation forecasts could boost the odds of the central bank increasing interest rates in the near future and would therefore be pound-supportive.

The Reserve Bank of New Zealand (RBNZ) will be delivering its latest interest rate decision later today. If the RBNZ takes a cautious stance, GBP/NZD could be driven to new post-Brexit highs.

A trio of unexpectedly upbeat UK economic reports for the services, manufacturing and construction sectors left the pound pretty upbeat as markets closed for the weekend and Sterling remains close to multi-month highs.

The GBP/EUR exchange rate begins this week at €1.1827 (up from this morning’s low of €1.1786), GBP/USD remains above $1.2950, GBP/AUD is trading at AU$1.7534 (up 5 cents from last week’s opening levels of AU$1.7070), GBP/NZD is holding NZ$1.8700 and GBP/CAD’s current rate of C$1.7735 is one of its highest since the UK voted to Brexit last year.

What impact did the French election have on GBP/EUR?

The new French President has intimated he will be taking a tough stance on Brexit, and any further hints that he plans to make the UK’s exit from the EU difficult could send the pound lower.

Wise Money Market Roundup

The new French President has intimated he will be taking a tough stance on Brexit, and any further hints that he plans to make the UK’s exit from the EU difficult could send the pound lower.

Although the reports aren’t expected to alter the Bank of England’s (BoE) current attitude on interest rates, they are at least an encouraging sign of how the UK economy is performing.

The data was enough to give the pound a leg up against its peers and help it shake off concerns surrounding the fraught relationship between Prime Minister Theresa May and EU officials.

Meanwhile, over in France, Centrist Emmanuel Macron managed to crush far-right Marine Le Pen in the second round of the French election, taking 65% of the vote.

While this outcome has helped dispel Frexit fears, it was so long expected that its impact on the euro was pretty minimal. EUR exchange rates did enjoy a small rally immediately after the results were announced, but quickly fell back to previous levels.

The Australian dollar came under pressure this morning as domestic building approvals plummeted (exacerbating worries about the Australian housing bubble) and China’s trade data revealed a sharp slump in imports.

What’s coming up money wise?

Today’s economic calendar isn’t exactly bursting with exciting releases, but there are a couple of reports to look out for.

The Eurozone’s Sentix Investor Confidence index for May is expected to climb from 23.9 to 25.2 – a potentially euro-positive result.

Canada is also set to release housing starts data, while the US rounds off the day with its measure of labour market conditions.

Macron’s victory may also be responsible for further movement in the currency market in the days and weeks ahead. The new French President has intimated he will be taking a tough stance on Brexit, and any further hints that he plans to make the UK’s exit from the EU difficult could send the pound lower.

While the pound might have failed to get the upper hand against the euro, upbeat UK data helped Sterling strengthen against the US, Australian, New Zealand and Canadian dollars.

The GBP/EUR exchange rate dropped from €1.1812 to €1.1753 but GBP/USD advanced from $1.2844 to $1.2941, GBP/AUD hit an eight-month high of AU$1.7530 and GBP/NZD fluctuated between NZ$1.8701 and NZ$1.8869.

Wise Money Market Roundup

What’s been happening?

A better-than-forecast UK services PMI gave the pound a bit of a boost on Thursday and helped the currency recover its previous Brexit-related losses.

The services report came in at 55.8 (beating predictions of 54.5) and rounding off a trio of unexpectedly perky releases.

Markit economist Chris Williamson said of the report; ‘The upturn in the services PMI rounds off a hat trick of good news after upside surprises to both the manufacturing and construction PMIs. The three surveys collectively point to GDP growing at a rate of 0.6% at the start of the second quarter.

While we expect consumer spending to slacken in coming months, with the April survey highlighting continued weakness in sectors such as hotels, restaurants and other household-facing businesses, there’s good reason to believe that at least 0.4% GDP growth can be achieved in the second quarter as a whole.’

The news that Prince Philip will be retiring from public life later this year didn’t impact the pound, but it did dominate headlines for much of the day.

Meanwhile, the belief that Centrist Emmanuel Macron won the final televised debate of the French Presidential election bolstered support for the euro ahead of Sunday’s vote, weakening GBP/EUR in the process.

What’s coming up?

The pound could extend gains against the US dollar before the weekend if the US non-farm payrolls report disappoints. Any weakness in the labour market could make the Federal Reserve think twice about raising interest rates in June.

Sunday’s French election will be the catalyst for GBP/EUR movement at the beginning of next week. The euro could rally if Macron does take the Presidency, despite his victory being so long expected.

However, if 2017 turns out to be as politically shocking as 2016 and far-right Marine Le Pen emerges triumphant, EUR exchange rates are likely to record dramatic losses.

Next week the most high-profile events on the UK’s economic calendar are the publication of UK trade data and the Bank of England’s interest rate decision/inflation report.

The BoE is highly unlikely to take any action at this juncture, and the minutes from its report may err on the side of caution in light of the upcoming UK general election.

Signs that the UK’s Brexit negotiations are going to be a bit more tempestuous than hoped have left the pound a bit despondent this week, with the currency failing to see much benefit from positive domestic data.

In the past 24 hours the GBP/EUR exchange rate has fallen from €1.1846 to lows of €1.1799 while GBP/USD has slumped from $1.2935 to $1.2842. However, GBP/AUD has risen from AU$1.7246 to AU$1.7393 and GBP/NZD has advanced from NZ$1.8623 to NZ$1.8751.

Wise Money roundup

Yesterday’s UK construction PMI continued the week’s theme of better-than-forecast UK data by coming in at 53.1 in April, up from 52.2 in March. This followed hot on the heels of Tuesday’s unexpectedly strong manufacturing report.

As the construction sector contributes so little to total economic output, the result was a pleasant surprise but had little positive impact on Sterling.

In fact GBP exchange rates actually weakened on Wednesday thanks to concerns that the UK’s Brexit negotiations were already getting off to a bad start.

Accusations from Prime Minister Theresa May that Brussels was interfering in the UK election and threats of a whopping €100 billion exit bill saw the pound drift lower against the euro.

GBP/USD also fell in the wake of the Federal Reserve’s interest rate decision. While the central bank took no action at this juncture, it left the door wide open to two further rate increases over the rest of 2017.

The Fed’s statement asserted that it ‘views the slowing in growth during the first quarter as likely to be transitory.

While expectations of a June adjustment supported the US dollar, a softening in higher-risk currencies helped the pound stand firm against the Australian and New Zealand dollars.

What’s coming up?

Rumours that the Queen has called a meeting of ‘all staff’ at Buckingham Palace have been dominating headlines today, but as long as the subject of the meeting doesn’t have an economic focus the UK’s services PMI is still likely to be the main cause of pound movement today.

A hat-trick of positive results would give the pound a boost, but if the all-important services sector is shown to be struggling the pound could extend recent losses.

Eurozone retail sales data is also likely to impact the GBP/EUR pairing. As it stands, sales are believed to have stagnated on the month but risen from 1.8% to 2.1% on the year.

While better-than-expected figures could send the euro higher, gains may be limited ahead of the second round of the French election – due to take place on Sunday. Over in the US we’ve got trade balance, initial jobless claims and durable goods orders data to focus on.

After getting off to a slow start to the week the pound rallied across the board thanks to an unexpectedly upbeat UK manufacturing report.

GBP/EUR fluctuated between €1.1790 and €1.1863, GBP/USD advanced from $1.2872 to $1.2947, GBP/AUD climbed to AU$1.7253 from AU$1.7089, GBP/NZD eased to NZ$1.8565 from NZ$1.8694 and GBP/CAD closed the day at C$1.7713.

Will the UK’s other PMI reports lend the pound further support? A rate hike is unlikely at this juncture, but US dollar volatility is expected to follow any hints about future adjustments.

Concerns that a recent meeting between UK Prime Minister Theresa May and European Commission President Jean-Claude Juncker wasn’t exactly amicable saw the pound slide on Tuesday.

However, Sterling’s losses proved short lived and GBP exchange rates were quick to rally after the UK’s manufacturing PMI was published.

Economists had predicted a slight slowing in manufacturing output, but the sector actually accelerated – with the PMI reading of 57.3 being the best result for three years.

Markit economist Rob Dobson had this to say; ‘The UK manufacturing sector made a solid start to the second quarter. Growth of output, new orders and employment all gathered pace, driven higher by the continued strength of the domestic market. ‘

He added; ‘There was also a solid bounce in new export business, as the weak sterling exchange rate helped manufacturers take full advantage of the recent signs of revival in the global economy, and especially the Eurozone, which is enjoying its best growth spell for six years. Although price pressures remain elevated, input cost inflation has eased significantly since hitting a record high in January.’

Meanwhile, the euro fluctuated in response to slightly below forecast unemployment data from the Eurozone and the news that a preliminary agreement had been reached between Greece and its creditors.

Wise Money asks what’s coming up?

In the early hours of this morning the British Retail Consortium’s (BRC) shop price index came in at -0.5%, as expected. This was a slight improvement on the previous reading of -0.8%.

The only other UK data scheduled for release today is Markit’s construction PMI.

The measure is expected to show a modest decline in construction output from 52.2 to 52. As the construction sector accounts for such a small proportion of total growth, such a result may not have much impact on the pound.

However, if the index massively over performs (like yesterday’s manufacturing PMI), the pound could gain, while a much lower-than-expected reading would be negative for GBP exchange rates.

Other notable reports to be on the lookout for today include the Eurozone’s Q1 growth data (which is forecast to accelerate slightly on the month but remain unchanged on the year) and the US ADP employment change, Markit services PMI and ISM non-manufacturing composite index.

While all the US reports are fairly high profile, their impact might be limited ahead of this evening’s Federal Reserve interest rate decision.

A rate hike is unlikely at this juncture, but US dollar volatility is expected to follow any hints about future adjustments. The US dollar could tumble if the Fed seems less likely to adjust interest rates in June then it did previously.

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17.

Less than impressive UK data left the pound weaker against the US dollar on Friday, and a general risk-off mood failed to limit Sterling’s losses against the Australian, New Zealand and Canadian dollars. The pound did hold firm against the euro however, with GBP/EUR managing to hold above the €1.1700 level.

GBP/USD dropped from $1.2473 to $1.2369 while GBP/NZD dipped from NZ$1.7908 to NZ$1.7795 and GBP/CAD slumped from C$1.6715 to C$1.6557.

GBP/AUD closed the week at AU$1.6500 but jumped by 0.5% on Monday as investors responded to the latest Australian housing data.

Accelerating consumer price pressures might force the BoE to reconsider its current wait-and-see stance on interest rates, so a stronger rate of inflation could send the pound higher.

There were a number of UK reports on the data calendar on Friday, but unfortunately for the pound none of them offered much cause for cheer.

Both industrial and manufacturing production unexpectedly declined in February (by -0.7% and -0.1% respectively) while construction output dropped -1.7% on the month and slowed to 0.5% on the year.

The UK’s trade deficit also widened and the NIESR GDP estimate for March signalled a slowing in growth in the first quarter.

Demand for the pound also eased as Bank of England (BoE) Governor Mark Carney gave no indication that UK interest rates would be increased in the near future.

Meanwhile, the US airstrike on a Syrian military base limited demand for higher-risk currencies but sent oil prices to a new one-month high (boosting the Canadian dollar in the process).

The US dollar closed out the week in a broadly stronger position as the US unemployment rate fell to its lowest level since 2007.

Wise Money markets data coming up

Today we’ve got news from the Eurozone, in the form of the Sentix investor confidence gauge, and a speech from Federal Reserve chairwoman Janet Yellen.

If the Eurozone’s confidence index shows the improvement in sentiment forecast by economists the GBP/EUR exchange rate could be pressured slightly lower.

Similarly, any hints from Yellen that the Fed could increase the number of planned interest rate hikes in 2017 would put pressure on GBP/USD.

The first bit of exciting UK news, the nation’s inflation report for March, is due out tomorrow.

At the moment the consumer price index is expected to come in at 0.3% on the month and 2.3% on the year. Accelerating consumer price pressures might force the Bank of England (BoE) to reconsider its current wait-and-see stance on interest rates, so a stronger rate of inflation could send the pound higher.